Ordinary Meeting Report 9 November 2017 Sunshine Coast Regional Council Page 1 8.2.1 SEPTEMBER 2017 FINANCIAL PERFORMANCE REPORT File No: Financial Reports Author: Coordinator Financial Services Business Performance Group Appendices: App A - 2018-2027 Budget Financial Statements Attachments: Att 1 - September 2017 Financial Performance Report PURPOSE To meet Council’s legislative obligations, a monthly report is to be presented to Council on its financial performance and investments. To address ongoing budget variances in advance of the next detailed review, this report also recommends adoption of revisions to the budget. EXECUTIVE SUMMARY This monthly financial performance report provides Council with a summary of performance against budget as at 30 September 2017 in terms of the operating result and delivery of the capital program. The operating result at 30 September 2017 shows a positive variance of $6.6 million compared to the forecast position from Budget Review 1. The variation is made up of higher than profiled operating revenue and lower than profiled operating expenses as shown in the table below. Further detail is provided in the proposal section of this report. Operating Performance Table 1: Operating Result as at 30 September 2017 April 2017 Current Budget $000 YTD Current Budget $000 YTD Actual $000 YTD Variance $000 Variance % Operating Revenue 434,821 163,545 167,122 3,577 2.2 Operating Expenses 420,565 99,733 96,703 (3,030) 3.0 Operating Result 14,256 63,811 70,419 6,608 10.4 Achievement of the full year budgeted operating result will allow Council to meet its debt repayments and capital expenditure commitments. As at 30 September 2017, $41.2 million (15.6%) of Council’s $264.1 million 2017/18 Capital Works Program was financially expended. The core Council Capital Program has progressed 20.6% of budget, an actual spend of $28.9 million. Council’s investment portfolio remains within the guidelines established under the Investment Policy. The next major budget review will be conducted in detail from December 2017 for Council consideration in February 2018. To address the major budget variances only reported as at 30 September 2017, a number of budget adjustments are proposed to amend the 2017/18 Budget. These adjustments will: Increase the operating result by $2.5 million to $16.7 million; Increase the capital expenditure budget by $5.1 million to $269.2 million, with associated capital revenue of $260,000;
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Ordinary Meeting Report 9 November 2017
Sunshine Coast Regional Council Page 1
8.2.1 SEPTEMBER 2017 FINANCIAL PERFORMANCE REPORT
File No: Financial Reports
Author: Coordinator Financial Services Business Performance Group
Appendices: App A - 2018-2027 Budget Financial Statements
Attachments: Att 1 - September 2017 Financial Performance Report
PURPOSE
To meet Council’s legislative obligations, a monthly report is to be presented to Council on its financial performance and investments. To address ongoing budget variances in advance of the next detailed review, this report also recommends adoption of revisions to the budget.
EXECUTIVE SUMMARY
This monthly financial performance report provides Council with a summary of performance against budget as at 30 September 2017 in terms of the operating result and delivery of the capital program.
The operating result at 30 September 2017 shows a positive variance of $6.6 million compared to the forecast position from Budget Review 1. The variation is made up of higher than profiled operating revenue and lower than profiled operating expenses as shown in the table below. Further detail is provided in the proposal section of this report.
Achievement of the full year budgeted operating result will allow Council to meet its debt repayments and capital expenditure commitments.
As at 30 September 2017, $41.2 million (15.6%) of Council’s $264.1 million 2017/18 Capital Works Program was financially expended.
The core Council Capital Program has progressed 20.6% of budget, an actual spend of $28.9 million.
Council’s investment portfolio remains within the guidelines established under the Investment Policy.
The next major budget review will be conducted in detail from December 2017 for Council consideration in February 2018. To address the major budget variances only reported as at 30 September 2017, a number of budget adjustments are proposed to amend the 2017/18 Budget. These adjustments will:
Increase the operating result by $2.5 million to $16.7 million;
Increase the capital expenditure budget by $5.1 million to $269.2 million, with associated capital revenue of $260,000;
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Sunshine Coast Regional Council Page 2
Decrease Council’s forecast closing cash position by $2.4 million to $215.6 million.
OFFICER RECOMMENDATION
That Council
(a) receive and note the report titled “September 2017 Financial Performance Report” and
(b) adopt the amended 2017/18 Budget Financial Statements to include the identified operating and capital budget adjustments (Appendix A).
FINANCE AND RESOURCING
There are no finance and resourcing implications from this report.
CORPORATE PLAN
Corporate Plan Goal: An outstanding organisation Outcome: 5.3 - A financially sustainable organisation Operational Activity: 5.3.7 - Sustainable financial position maintained.
CONSULTATION
Portfolio Councillor Consultation
Consultation has been undertaken with the Portfolio Councillor.
Internal Consultation
All departments and branches participated in the formation of the recommendations associated with this report.
External Consultation
No external consultation is required for this report.
Community Engagement
No community engagement is required for this report.
PROPOSAL
This monthly financial performance report provides Council with a summary of performance against budget as at 30 September 2017 in terms of the operating result and delivery of the capital program.
The operating result at 30 September 2017 shows a positive variance of $6.6 million compared to the forecast position.
Operating Revenue
Year to date revenues as at 30 September 2017 of $167.1 million shows a positive variance of $3.6 million.
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Sunshine Coast Regional Council Page 3
Table 2: Substantial Revenue variances as at 30 September 2017
Operating Revenue Large Variances
YTD Current Budget $000
YTD Actual $000
YTD Variance $000
Variance
%
Net Rates and Utility Charges 132,108 133,599 1,492 1.1
Fees and Charges 15,355 17,165 1,810 11.8
Other Revenue 2,209 2,803 594 26.9
Interest Received from Investments 2,274 1,787 (487) (21.4)
Net Rates and Utility Charges
The favourable variance of $1.5 million relates somewhat to slightly higher growth in general rates than anticipated, however the variance is mostly attributable to higher cleansing charges. Growth in cleansing charges has experienced a lag from the general rates growth experienced in 2016/17. There is also a higher take up of services at the Sunshine Coast University Hospital.
Fees and Charges
Fees and charges revenue of $17.2 million, is $1.8 million ahead of year to date budget as at 30 September 2017. The significant items contributing to this variance are:
$802,000 in Waste Management predominantly due to a higher instance of construction and demolition waste than is usual
$282,000 variance relating to higher application volumes in Development Services.
$463,000 higher fee revenue for Holiday Parks, following high occupancy during the September school holidays. Occupancy for the year to date is 6% higher than 2016/17.
Other Revenue
Other revenue is ahead of the profiled budget to date by $594,000 this is made up of:
$180,000 in Waste Management for higher sales of recyclables and additional revenues for gas flaring.
$141,000 for Economic Development workshop fees and stall holders fees generated from the Caloundra Music Festival. Future reports will provide an indication of the net result for the festival.
$132,000 generated through sundry recoupments in Community Response.
$78,000 favourable variance in sponsorship revenue for Horizon Festival
Interest Received from Investments
As at 30 September 2017 interest received is below budget by $487,000. The year end result will be impacted by declining interest yields and lower than anticipated cash levels. There will be a watching brief in relation to future interest rates and cash levels.
Budget Adjustments to Operating Revenue
Following the finalisation of the first quarter results, it is proposed to address the stable, ongoing variances through budget adjustments in advance of the mid-year budget review. The following table sets out the proposed budget adjustments, which reflect an increase to the 2017/18 operating revenue budget of $2.9 million.
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Sunshine Coast Regional Council Page 4
Table 3: Revenue Budget Adjustments
Proposed Budget Adjustment
Current Budget $'000
Proposed Adjustment
$'000
Revised Budget $'000
Net Rates and Utility Charges increase as a result of higher volumes for cleansing charges and marginally higher General Rates
275,190 2,109 277,299
Fees and Charges increases resulting from higher occupancy at Holiday Parks and abnormal tip usage for construction and demolition waste
57,183 1,039 58,222
Interest received from investments ‐ reduced due to lower than anticipated rates and cash levels
9,374 (500) 8,874
Operating Grants and Subsidies ‐ First Five Forever Grant transfer to capital, for expenditure on customised park seats
7,103 (260) 6,844
TOTAL OPERATING REVENUE ADJUSTMENTS 2,388
Operating Expenses
Year to date expenditure as at 30 September 2017 of $96.7 million shows a variance under budget of $3.0 million.
Employee Costs
As at 30 September 2017 employee costs are tracking to budget, with the year to date variance less than 0.5%.
Materials and Services
Materials and services account for the majority of the expenditure variance as at 30 September 2017, having underspent budget by $3.2 million. The variance to budget predominantly relates to core programs and is consistent across all departments. This is in line with the usual trend for the early part of the financial year.
The largest variance, $767,000 is attributable to Waste Management and is made up of several minor variances across multiple activities. Operational savings may be recognised for reduced leachate removal costs due to capital improvements. This will be monitored over the coming months.
The materials and services budget will be adjusted, as a result of the additional commissions and utilities payable in relation to higher Holiday Park revenue and the transfer of budget to capital for the First Five Forever grant, as shown in the table below. No other adjustments are proposed to the operating expense budgets at this time, given variances are consistent with prior year trends which indicate higher expenditure will occur later in the financial year. A detailed review will be undertaken as part of Budget Review 2.
Table 4: Expenditure Budget Adjustments
Proposed Budget Adjustment
Current Budget $'000
Proposed Adjustment
$'000
Revised Budget $'000
Materials and Services increased due to higher occupancy at Holiday Parks ($178k) and reduced for First Five Forever Grant to Capital (‐$260k).
179,566 (82) 179,484
TOTAL OPERATING EXPENSE ADJUSTMENTS (82)
Capital Expenditure
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Sunshine Coast Regional Council Page 5
As at 30 September 2017, $41.2 million (15.6%) of Council’s $264.1 million 2017/18 Capital Works Program was financially expended.
Table 5: Capital Expenditure by Program at 30 September 2017
Capital Works Program CurrentBudget$000
YTD Actual$000
% Current Budget
Expended
Forecast Year End Actual $000
Aerodromes 497 4 0.8 476
Buildings and Facilities 13,028 2,329 17.9 13,063
Coast and Canals 2,363 63 2.7 2,296
Divisional Allocations 5,238 226 4.3 1,263
Environmental Assets 670 13 2.0 730
Fleet 3,000 51 1.7 2,950
Holiday Parks 1,433 85 5.9 1,376
Information Technology 3,983 383 9.6 3,150
Parks and Gardens 15,219 3,956 26.0 15,071
Quarries 1,308 11 0.8 98
Stormwater 7,549 1,196 15.8 7,193
Strategic Land and Commercial Properties 8,633 5,185 60.1 11,741
Sunshine Coast Airport 1,123 653 58.1 1,346
Transportation 58,723 13,229 22.5 57,683
Waste 17,152 1,480 8.6 15,878
Total SCC Core Capital Program 139,918 28,865 20.6 134,313
Total Other Capital Program 124,209 12,314 9.9 121,905
TOTAL 264,127 41,179 15.6 256,218
SCC Core Capital Program
The core Council Capital Program has progressed 20.6% of budget, an actual spend of $28.9 million. The Actual YTD includes all works that have been goods receipted and accrued as at 30 September 2017. The table above shows the actual expenditure against full year budget by program, as well a forecast actual at year end.
Currently the core program is forecasting 96% of program delivery at year end. Three programs are currently forecasting a year end result below the 90% benchmark.
Divisional Allocations – the lower forecast reflects the value of the program yet to be allocated to specific projects.
Information Technology – The Human Resource Information System project has been rescheduled to align with delivery of other major corporate systems.
Quarries – Major components of the program, the replacement of the loader and skid steer, are not required this financial year as it is not being utilised at the expected rate. It is proposed to reduce the capital budget to recognise these deferrals to 2019/20.
The Strategic Land and Commercial Properties program has currently forecast a year end result above 110%. The adopted Balance Sheet and Cash Flow allows for a program of works for LGIP and Environment Land of $10 million. Due to the uncertain timing for land
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Sunshine Coast Regional Council Page 6
acquisitions the capital budget schedule is updated once contracts are secured. The Strategic Property team is currently investigating a program up to $11.7 million, however not all of these will settle in 2017/18.
Capital Budget Adjustments
Projects have been identified through recent reports to Council, which require action prior to the next budget review. Budget adjustments are proposed for two new projects and transfers from operating will also be recognised. Projects within the Quarry Program will be deferred as well, as explained above.
Table 6: Capital Budget Adjustments
Proposed Budget Adjustment
Current Budget $'000
Proposed Adjustment
$'000
Revised Budget $'000
Incana Court Carpark Mooloolaba ‐ bring forward funds 2018/19. The timing for other works in Mooloolaba will require this temporary car park be available by February 2018.
‐ 600 600
Quarry Program ‐ defer Loaders and Skid Steer Replacement to 2019/20
1,308 (700) 608
First Five Forever Grant transfer from operating to capital for customised park seats
‐ 260 260
Land Acquisition ‐ Council resolution at the October Ordinary Meeting endorsed the acquisition of land in November 2017. This will require an increase to the capital expense budget.
‐ 4,956 4,956
TOTAL CAPITAL ADJUSTMENTS 264,127 5,116 269,243
Corporate Major Projects & Region Making Program
Other major projects have expended 12.8% of full year budget as at 30 September 2017, and are forecasting a year end result of 98% or $122 million.
Corporate Major Projects – Current forecasts only reflect delivery of half the program due to uncertainty around the delivery of street lighting conversion to LED. A pilot project will be undertaken to inform an updated business case.
Maroochydore City Centre – 18% Actual spend to date predominantly relates to progress on Aerodrome road and overall project management and finance costs. The program is currently forecasting a 4% year end variance to budget which will be reassessed at Budget Review 2.
Sunshine Coast Airport Expansion – A year to date actual of 3.1% has been achieved with significant expenditure expected to occur once sand dredging begins next calendar year. The dredging cannot commence until after the environmental protection period to March 2018, which relates to turtle nesting at Marcoola Beach.
The following graph shows the profile of the year end forecasts against budget for the core and region making programs.
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Investment Performance
All investment parameters remain within the guidelines established by the Investment Policy.
For the month ending 30 September 2017 Council had $322 million cash (excluding Trust Fund) with an average interest rate of 2.59%, being 0.88% above benchmark. This is compared to the same period last year with $376 million cash (excluding Trust Fund) with an average interest rate of 2.98%, being 1.25% above benchmark.
The benchmark used to measure performance of cash funds is Bloomberg AusBond Bank Bill Index (BAUBIL) and the Bank Bill Swap Rate (BBSW) for term deposits.
Legal
This report ensures that Council complies with its legislative obligations with respect to financial reporting in accordance with Section 204 of the Local Government Regulation 2012.
Investment of funds is in accordance with the provisions of the Statutory Bodies Financial Arrangements Act 1982 and the associated Regulations and the Local Government Act 2009.
Failure to achieve the budgeted operating result will negatively impact Council’s capacity to complete its capital expenditure program.
Previous Council Resolution
Special Meeting Budget 15 June 2017 (SM17/34)
That Council:
(a) receive and note the report titled “Adoption of the 2017/18 Budget and Forward Estimates for the 2018/19 to 2026/27 Financial Years”
(b) adopt the 2017/18 Budget Schedules (Appendix A) including Forward Estimates and
(c) adopt the 2017/18 Capital Works Program, endorse the indicative four-year program for the period 2018/19 to 2021/22, and note the five-year program for the period 2022/23 to 2026/27 (Appendix B).
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Sunshine Coast Regional Council Page 8
Budget Review 1, 14 September 2017 (OM17/175)
That Council:
(a) receive and note the report titled “Budget Review 1 2017/18” and
(b) adopt the amended 2017/18 Budget Financial Statements to include the identified operating and capital budget adjustments (Appendix A)
Ordinary Meeting 12 October 2017 (OM17/204)
That Council:
(a) delegate authority to the Chief Executive Officer to enter into negotiations and processes to execute and finalise the acquisitions as discussed in the confidential session
(b) resolve, pursuant to section 236(2) of the Local Government Regulation 2012, that an exception to dispose of an interest in land (easement/s) on the sites as discussed in the confidential session, other than by tender or auction applies as the disposal is pursuant to s236(1)(b)(i) to a government agency and
(c) request the Chief Executive Officer to provide a further report to council on the outcomes of the negotiations with Department of Natural Resources Mines.
Related Documentation
2017/18 Adopted Budget
Critical Dates
There are no critical dates for this report.
Implementation
There are no implementation details to include in this report.
STATEMENT OF INCOME AND EXPENSESFor the period ending 30 June 2018 SUNSHINE COAST COUNCIL TOTAL
Original Current Revised Forward EstimateBudget Budget Budget2017/18 2017/18 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27